Wednesday, April 02, 2008

History repeats itself (1973=> 2008)

Once again, some members of Congress seem to be more interested in appearing to do something (to get reelected) than actually solving the energy problem. They got air-time to grill oil execs. Here we go again. We are headed down the exact same path we did after 1973... which absolutely did not solve the problem!

Due to the OPEC-led oil-shock of 1973, Congress applied a "windfall profits tax" in 1980. This reduced oil companies ability to find better ways to produce oil. Effect? Oil companies can't pump more oil due to demand increases generated by tremendous growth in China & India. Prices went up. This unintended consequence is the exact opposite of what Congress wanted: lower prices. Government at work.

And on the other side, the U.S. government is providing $10 to $20 billion in subsidies to these very same companies. Money that could be used for finding renewable, low-carbon solutions - other than inflation-inducing ethanol (which also requires burning to work).
Government at work.

Bottom line: If we just let the market-forces take care of itself, stop subsidizing oil companies and focus on real solutions instead of grand-standing for political purposes, perhaps we could let the market sort itself out. Gasoline at $10 a gallon would be incentive enough for profit-minded entrepreneurs and investors to solve the problem. What's next, price controls? This would be yet another folly - that would further delay Solving Our Energy Problems.

Albert Einstein said - “We cannot solve our significant problems from the same level of thinking we were at when we created these problems.” This much is clear.

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